Thursday, July 21, 2011

Next For Liberia: Oil?

Steve LeVine, over at his excellent energy-themed blog The Oil and The Glory is reporting that the war-torn West African nation of Liberia is looking to oil as the catalyst for rebuilding after decades of civil war. Large deposits of oil are known to exist in the Gulf of Guinea along Africa's coast. Nigeria was the first nation to cash in on the offshore riches, Ghana joined the club of oil exporting nations late last year. Now Liberia is hoping that the good fortune and oil reserves will continue to spread west. Exploration activities will begin in a few months. If the reserves pan out, Liberia could be producing oil by the end of the decade.

Near the end of his piece LeVine talks about the threat of the “resource curse” striking Liberia, it's a point worth taking a closer look at. In case you're unfamiliar with the term, the resource curse is a concept in international development coined to describe situations where impoverished nations suddenly discover a valuable natural resource, but instead of lifting the nation out of poverty, the country is gripped by corruption, crime, and political (occasionally actual) infighting, with the people in some cases winding up poorer than they were before the resource was found. The resource curse has struck nations around the world, but the causes are often the same – poverty produces a poorly-educated population and civic institutions that barely work, if they function at all. The country can't absorb the wealth suddenly flooding into it: institutions that barely worked before now have massive budgets to mismanage, politicians often become fixated on pet projects to build their legacy without concern over whether or not they help the nation (skimming a healthy amount off the top is also commonplace), and fights break out over control of the natural resources, sometimes rising to the level of insurgencies if not full-blown civil wars. Foreign companies historically have taken advantage of unsophisticated local governments to sign deals that massively favor them while depriving the people of promised wealth.

Given the fragile state of civil governance in Liberia, you can't be terribly excited about their prospects. They could do a lot worse than to follow the example of their Ghanaian neighbors, though. Faced with a similar petro-windfall, Ghana has taken pains to try to avoid the resource curse. Part of that plan has been to start an education program to create a home-grown generation of oil engineers, accountants and other experts, the nation developed a comprehensive strategy to become energy independent within the next 10 years and to fund needed infrastructure projects, and debates over what to do with the oil money have become a staple of public discourse. It is too early yet to determine how well Ghana has done, but they are actively trying to avoid becoming the latest victim of the resource curse.
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